You’ve probably noticed that it’s getting more and more expensive to buy a home. To help more people get onto the housing ladder, the government has introduced a number of schemes aimed at helping you buy your first home.
How does Help to Buy differ from Shared Ownership?
Which home buying scheme is right for me?
The two most established schemes available to you are the Shared Ownership scheme and the Help To Buy scheme. So how do you decide which is the best one for you?
What is Shared Ownership?
If you purchase a house or flat using Shared Ownership, you will part own and part rent your home. You’ll start with buying a share of the property on a 125 year lease – this may vary. The minimum share you can purchase is 25% and the maximum is 75%. You’ll pay a mortgage on the share that you own, and you’ll pay a subsidised rent for the rest. As time goes by, you have the option to increase the share you own until you eventually own 100% of the property.
Shared Ownership has several pros and cons:
- Shared Ownership allows you to get on the property ladder without overstretching yourself.
- You won’t need a large deposit.
- It can be easier to obtain a mortgage, even if you’re on a lower wage.
- Your monthly repayments can work out cheaper than if you had an outright mortgage. Sometimes the monthly payments are lower than if you were to rent privately.
- You have the option to buy a bigger share in your home if you feel you can afford it in the future.
- There are many Shared Ownership properties available in London.
- Some people would prefer to own their entire home right from the start.
- Your choice of mortgage is restricted to those suitable to the scheme. An L&Q appointed independent mortgage advisor will be able to advise you during your financial interview.
- There may be restrictions on what home improvements you can do. You may need to obtain permission before you make any structural alterations to your home.
James bought a one bedroom flat in Greenwich
“To actually take that first step and get on the ladder is a challenge. Shared Ownership makes the first step onto the property ladder much more affordable. I feel like I’m actually investing in my future.”
What is the Help To Buy equity loan scheme?
Under the Help To Buy equity loan scheme, you’ll need a deposit of at least 5% of the total value of the property.
The government will then boost your deposit with a loan of up to 20% of the total cost of the home you intend to buy. This effectively means you have a larger deposit.
If you are buying in London, you could borrow up to 40% of the total cost of the home, with the London Help to Buy scheme. L&Q offer this scheme on some of our properties. You can find out more on our Help to Buy page.
- The larger deposit can give you a greater choice of mortgage products.
- It means you don’t have to take out a costly 95% mortgage.
- You do not pay any interest on your loan during the first 5 years.
- Only suitable if you can afford the mortgage repayments for the value of the entire property.
- Only available for new build properties.
- Your loan will become more expensive over time and must be repaid in chunks of at least 10%.
- You will be charged fees on the loan if you do not repay it within 5 years.
- The amount you repay is not fixed and will fluctuate with the price of your home.
View a full scheme comparison table for more details.